On November 18, 2024, the International Association of Insurance Supervisors (IAIS) released a public consultation on a Draft Application Paper on AI. The IAIS notes that the adoption of AI systems offers substantial commercial benefits across the insurance value chain but also poses notable risks that could detrimentally impact consumers as well as the financial soundness of insurers. The objective of the application paper is to support supervisors when applying the Insurance Core Principles to promote appropriate and globally consistent oversight of the use of AI within the insurance sector.

The IIF responded to this consultation through a joint effort between its Regulatory and Digital teams. On February 17, the IIF submitted its response to the IAIS, highlighting the following key issues:

• The Draft Application Paper adds new requirements that exceed the IAIS’s description of purpose of an application paper and sets out markers that could lead to de facto regulation in the form of guidance. Many aspects of the Paper warrant a fundamental reconsideration by the IAIS.
• The Insurance Core Principles provide for the establishment of comprehensive risk management frameworks that sufficiently address emerging technologies such as AI.
• The need for additional guidance beyond the Insurance Core Principles should be supported by a gap analysis.
• The scope of AI systems in the Draft Application Paper is overbroad; focus should be placed on Generative AI and deep neural networks. Traditional statistical methods should be out of scope of the Paper.
• The Draft Application Paper should acknowledge the broader systemic benefits of AI.
• The ultimate result of adopting the Paper in its current form would likely be to retard the application of advanced AI in the insurance industry and consequently to reduce potential cost savings, at a time when policyholders are already challenged in obtaining risk cover.